Unit-II TQM Principles

Presented by
Dr. R. RAJA, M.E., Ph.D.,
Assistant Professor, Department of EEE,
Muthayammal Engineering College, (Autonomous)
Namakkal (Dt), Rasipuram – 637408
16EEE20 -TOTAL QUALITY MANAGEMENT
MUTHAYAMMAL ENGINEERING COLLEGE
(An Autonomous Institution)
(Approved by AICTE, New Delhi, Accredited by NAAC, NBA & Affiliated to Anna University),
Rasipuram - 637 408, Namakkal Dist., Tamil Nadu.
UNIT II :TQM PRINCIPLES

Unit I: TQM Principles
Principles of TQM, Leadership – Concepts – Role of Senior Management – Quality
Council, Customer satisfaction – Customer Perception of Quality, Customer
Complaints, Service Quality, Customer Retention, Employee Involvement –
Motivation, Empowerment, Teams, Recognition and Reward, Performance
Appraisal, Benefits– Supplier Partnership – Partnering, sourcing, Supplier Selection,
Supplier Rating, Relationship Development, Performance Measures – Basic
Concepts, Strategy, Performance Measure
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Contd..
Focus on Customer
When using TQM it is of crucial importance to remember that only customers
determine the level of quality. Whatever efforts are made with respect to training
employees or improving processes, only customers determine, for example through
evaluation or satisfaction measurement, whether your efforts have contributed to the
continuous improvement of product quality and services.
Employee Involvement
Employees are an organization’s internal customers. Employee involvement in the
development of products or services of an organization largely determines the quality
of these products or services. Ensure that you have created a culture in which
employees feel they are involved with the organization and its products and services.
Process Centred
Process thinking and process handling are a fundamental part of total quality
management. Processes are the guiding principle and people support these processes
based on basis objectives that are linked to the mission, vision and strategy.
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Integrated System
Following principle Process centred, it is important to have an integrated
organization system that can be modelled for example ISO 9000 or a company
quality system for the understanding and handling of the quality of the products or
services of an organization.
Strategic and Systematic Approach
A strategic plan must embrace the integration and quality development and the
development or services of an organization.
Decision-Making Based on Facts
Decision-making within the organization must only be based on facts and not on
opinions (emotions and personal interests). Data should support this decision-making
process.
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Contd..
Communication
A communication strategy must be formulated in such a way that it is in line with the
mission, vision and objectives of the organization. This strategy comprises the
stakeholders, the level within the organization, the communications channels, the
measurability of effectiveness, timeliness, etc.
Continuous Improvement
By using the right measuring tools and innovative and creative thinking, continuous
improvement proposals will be initiated and implemented so that the organization
can develop into a higher level of quality.
A supporting Total Quality Management tool that could be used is the Deming
cycle (Plan-Do-Check-Act) or the DMAIC process.
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Leadership
 The role of leadership in quality management forms the backbone of any
improvement strategy. Leaders provide a unity of purpose, while also
establishing the direction of the organisation. As such, the responsibility of
leaders consists of creating and maintaining the internal environment. In this
environment, employees are able to become completely involved in achieving
the organisation’s goals and aims. In this way, good leadership is essential in
order to improve quality across the organisation, as the leading force that sets
objectives and assists employees to implement these objectives.
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Concepts
 Quality: The totality of features and characteristics of product or service that
bears on its ability to satisfy stated or implied needs of a customer.
 Quality Policy: The overall quality intentions and directions of an organization
as regards quality formally expressed by top management. The quality policy
forms an element of the corporate policy and is authorized by top management.
 Quality Management: The aspect of the overall management function that
determines and implements quality policy. Quality management includes
strategic planning, allocation of resources and other systematic activities for
quality such as operations and evaluations.
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Contd..
 Quality Assurance: Quality assurance are all those planned and systematic
actions necessary to provide adequate confidence that a product or service will
satisfy requirements of a customer. Unless the requirements of customer are
fully reflected in the product or service, quality assurance will not be complete.
Quality assurance serves as a management tool to provide confidence in
supplier/manufacture in contractual situation.
 While taking a broad view of quality control, we come across different words
such as limits, tolerance, allowance, fit etc. These words are described in terms
of below limits. Limits for a dimension or other unit of measurement are the
two extreme permissible measurements for that dimension or unit.
 Quality Control: Quality controls are operational techniques and activities that
are used to fulfill requirements for quality. Quality control techniques and
activities aim both, at monitoring a process and at eliminating causes of
unsatisfactory performance at relevant stages of the production in order to
achieve economic effectiveness of an organization.
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Contd..
 Conformity: An affirmative indication or judgment that the
supplier/manufacturer of a product or service has met the requirements of the
relevant specifications, contact or regulations and also the state of meeting
requirements, is the real test of quality.
 "Quality Circle": QC is a process that stimulates everyone to achieve greater
satisfaction in the work environment. It is based on mutual trust and
cooperation. It also includes group participation, information sharing and
decision making. Its primary aim is to provide a better quality of working life to
workmen at all levels in an organization. "QC is a small group of employees in
the same work. work area or doing a similar type of work who voluntarily meet
regularly for about an hour every week to identify, analyse and resolve wok-
related problems, leading to improvement in their total performance and
enrichment of their work life".
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Role of Senior Management
 The title of senior manager is most often used and encountered in large
organizations with multiple layers of management. A senior manager has
responsibilities and authority that are broader in scope than a front-line
manager, and a door is typically open for senior managers to move into a
director- or general manager-level role.
 The flip side is that the position can involve a good many challenges and it
almost always brings with it a great deal of responsibility. Being a senior
manager is not for the faint of heart and success can depend on your personality
and skills.
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Common Responsibilities
 Like all managers, the senior manager is responsible for planning and directing
the work of a group of individuals. They monitor their work and takes
corrective actions when necessary.
 Senior managers might guide workers directly or they might direct
several supervisors, who in turn directly manage the workers. The senior
manager often supervises the largest or most important group or groups in a
company.
Core responsibilities of the senior manager include:
 Providing guidance to direct reports, typically comprising first-line managers
and supervisors
 Ensuring clarity around priorities and goals for the entire functional area
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Contd..
 Approving requests for investment to a certain level of authority
 Managing overall financial budgeting for her function
 Approving hiring and firing requests within her group
 Guiding the talent identification and development processes for a group or
function
 Working across functions with peers in other groups to ensure collaboration for
shared goals
 Interacting with senior management for reporting
 Working with senior management and other peers for strategy development and
execution planning
 Communicating financial and goal results and key performance indicators to
direct reports
 Facilitating goal-level creation for the broader function and working with
managers to ensure the goals cascade to all workers
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Quality Council
A quality council is established to provide overall direction. The council is composed of
 Chief Executive Officer
 Senior Managers
 Coordinator or Consultant
 A representative from the Union Duties of the council are
 Develop the core values, vision statement, mission statement and quality policy
statement
 Develop the strategic long term plan with goals and Annual Quality Improvement
Program with objectives
 Create the total education and training plan
 Determine and monitor the cost of poor quality
 Determine the performance measures
 Ø Determine projects those improve the process
 Ø Establish multifunctional project and work group teams
 Ø Revise the recognition and rewards system
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Contd..
A typical meeting agenda will have the following items
 Progress report on teams
 Customer satisfaction report
 Progress on meeting goals
 New project teams
 Benchmarking report
 Within three to five years, the quality council activities will become ingrained
in the culture of the organization.
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Customer Satisfaction
 This inverted pyramid is a good way to depict the importance of customers. She
is at the top of the pyramid and the CEO is at the bottom. This shows the
relative importance of people at the bottom of the hierarchy. A company never
makes a product for its top management people, rather it is meant for the
customer. As front line employees are in direct contact with people so they are
in a better position to understand a customer’s needs and problems. Every effort
should be taken by the organization to seek opinion from front line employees.
Even in case of empowerment it is front line employee who should be having
more empowerment which will enable him to solve customer problem on the
spot.
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Customer Perception of Quality
If a particular feature suits a particular customer need then that feature is going to
win a customer’s heart. This diagram shows how the red area is the common
juxtaposition of a company’s offerings and customer’s needs. Any product or service
falling in this zone will be a surefire recipe for organization’s success. Let us take
example of Maggi noodles. When it was launched in India in early eighties the taste
was not accepted by the Indian taste-bud. Nestle researched properly and came with
‘Masala Tastemaker’, which was lapped up by the customer. Now after two decades
Maggi can be found in almost every household in India.
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Internal Customers
Internal customers are as important as external customers. The above picture shows
how important a cog is internal customer in the grand design of things. Internal
customer helps change an input to a product which will be used by the external
customer.
1. What do you need from me
2. What do you do with my output
3. Are there any gaps between what you
need and what you get
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Customer Complaints
 Customer complaints are measured as a percentage of respondents who indicate
they have complained to a company directly about a product or service within a
specified time frame. More complaints mean more dissatisfaction.
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Service Quality
 Companies often introduce new products to maintain competitiveness.
However, it is the service quality and the resulting customer satisfaction that are
decisive for long-term business success. We at Spectos support industries with
high quality requirements in the implementation of tailor-made solutions to
continuously monitor and improve the quality of services. Our mission is to
make data and information tangible, to close the gap between analysis and
action, and to achieve continuous improvement in day-to-day business. Key
element is our in-house developed Spectos Real-Time Performance
Management™ Suite.
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Customer Retention
What is customer retention?
 Customer retention is the collection of activities a business uses to increase the
number of repeat customers and to increase the profitability of each existing
customer.
 Customer retention strategies enable you to both provide and extract more value
from your existing customer base. You want to ensure the customers
you worked so hard to acquire stay with you, have a great customer experience,
and continue to get value from your products.
 In short, acquisition creates a foundation of customers while your retention
strategy is how you build customer relationships and maximize revenue for
each one. But how much time and resources should you devote to your
retention program? The answer to that depends on your store.
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Contd..
When to focus on customer retention
 Whether you should focus more on customer acquisition or retention is heavily
influenced by where your store is in its lifecycle. A store that started yesterday
is vastly different than one that’s been up and running for many years.
 Take a look at the timeline below for general guidance on your store’s potential
investment levels.
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Contd..
1. Just starting: When you’ve just started your store there is one thing you should
be focused on: getting customers. At this point your acquisition efforts should
completely trump retention. Focus on strategies and tactics that will help you grow
your customer base.
2. Gaining traction: You now have customers and you are getting sporadic sales. At
this stage you can begin to introduce retention elements to encourage each customer
to buy more. My recommendation would be to start with retention email
campaigns that focus on encouraging a past customer to purchase from you again.
3. Consistent: You aren’t quite an ecommerce juggernaut, but sales are growing.
This is the point where you should begin to think about mixing in more retention
with your acquisition efforts. You can look at starting a referral and/or
a loyalty program as well as getting more serious with marketing automation.
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Contd..
4. Established: You are now an established ecommerce store. A common problem
for retailers of this size is finding ways to continue to grow. Acquisition may be
leading to a lot of one time purchases, but a retention strategy can get customers to
buy more often which increases their lifetime value. At this stage, you should be
serious and deliberate about your retention efforts.
5. Well-established: At this stage your store has made it past the initial gauntlet.
You’ve achieved many early successes and you have a lot of processes and
automations in place. Now is the time to focus heavily on retention.
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Employee Involvement
What is Employee Involvement?
Depending on your background or specialty, you may refer to it as engagement,
voice, participation, democracy, etc. No matter what you call it, the concept of
employee “voice” has been a topic of consideration for centuries. Even ancient
Romans understood the value of having direct participation in matters of business
and state. Organizations are still realizing the importance of employee involvement
in every type and level of work. So what exactly is employee involvement and how
can organizations benefit from it?
Employee involvement can be defined as: The direct participation of staff to help an
organization fulfill its mission and meet its objectives by applying their own ideas,
expertise, and efforts towards solving problems and making decisions. From this
definition, participation can include representative participation, direct
communication, and upward problem solving. We will focus on the latter two
categories because this article is more about understanding outcomes, tools, and
methods.
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Motivation
Motivation
A process model is used to demonstrate that satisfaction of the higher-level needs of
esteem and self-actualization is required to produce true motivation. By
understanding the process of motivation, we may become more effective in
improving patient care.
Motivation in management
Effective managers have the ability to motivate those they work with to behave in a
specific, goal-directed way. Motivation is defined as energizing, directing and
sustaining employee efforts. Managers want a sustained effort from their employees
so that they work hard whether or not the boss is present.
Motivation and types of motivation
'Motivation is a biological, social or psychological state that drives a person towards
a specific action'. ... 'Motivation is a desire that fuels an individual to perform or
continue an action based on needs and wants of the individual'. Meaning: Human
beings engage in various actions.
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Empowerment
Concept of employee empowerment
Employee empowerment is defined as the ways in which organizations provide
their employees with a certain degree of autonomy and control in their day-to-day
activities. A key principle of employee empowerment is providing employees the
means for making important decisions and helping ensure those decisions are
correct.
Principle of empowerment
The balance begins to emerge as managers internalize eight critical principles of
empowerment, namely: protect the dignity of all employees; manage perceptions,
not just the “facts”; use organizational authority to release rather than inhibit human
potential; use consensus decision making; clarify vision, mission.
Benefit of empowerment
The benefits of empowerment are many. They include higher levels of employee
satisfaction, a sense of shared purpose, and greater collaboration. The overall result
for the organization is to deliver enhanced value to the customer.
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Teams
 A team is defined as a group of people who perform interdependent tasks to
work toward accomplishing a common mission or specific objective.
 Some teams have a limited life: for example, a design team developing a new
product, or a continuous process improvement team organized to solve a
particular problem. Others are ongoing, such as a department team that meets
regularly to review goals, activities, and performance.
 An organization with many teams requires careful alignment. As teams and
individuals link with other teams, the principles of developing understanding
and trust will apply, but the structure will get more complex (Figure 1).
Understanding the many interrelationships that exist between organizational
units and processes, and the impact of these relationships on quality,
productivity, and cost, makes the value of teams apparent.
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Contd..
The Three Types of Teams
 Many of today’s team concepts gained popularity in the United States during
the 1970s through the use of quality circles or employee
involvement initiatives. However, these initiatives were often seen as separate
from normal work activities, not as integrated with them.
 Team designs have since evolved into a broader concept that includes many
types of teams formed for different purposes.
Three primary types of teams are typically used within the business environment:
1. Process Improvement Teams
2. Work Groups or Natural Teams
3. Self-Managed Teams
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Contd..
Process Improvement Teams
Process improvement teams are project teams that focus on improving or developing
specific business processes. These teams come together to achieve a specific goal,
are guided by a well-defined project plan, and have a negotiated beginning and end.
Work Groups or Natural Teams
Work groups, sometimes called "natural teams," have responsibility for a particular
process (e.g., a department, a product line, or a stage of a business process) and work
together in a participative environment. The degree of authority and autonomy of the
team can range from relatively limited to full self-management. The participative
approach is based on the belief that employees will be more productive if they have a
higher level of responsibility for their work.
Self-Managed Teams
Self-managed teams directly manage the day-to-day operation of their particular
process or department. They are authorized to make decisions on a wide range of
issues, such as safety, quality, maintenance, scheduling, and personnel. Their
responsibilities also include processes traditionally held by managers, such as goal-
setting, allocation of assignments, and conflict resolution.
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Contd..
Team processes offer the following benefits to the organization:
 Synergistic process design or problem solving
 Objective analysis of problems or opportunities
 Promotion of cross-functional understanding
 Improved quality and productivity
 Greater innovation
 Reduced operating costs
 Increased commitment to organizational mission
 More flexible response to change
 Increased ownership and stewardship
 Reduced turnover and absenteeism
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Contd..
Individuals can gain the following benefits from teams:
 Enhanced problem-solving skills
 Increased knowledge of interpersonal dynamics
 Broader knowledge of business processes
 New skills for future leadership roles
 Increased quality of work life
 Feelings of satisfaction and commitment
 A sense of being part of something greater than what one could accomplish
alone
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Reward and Recognition
 Companies use rewards and recognition to motivate employees and demonstrate
that they are appreciated. Often, rewards and recognition take the form of extra
compensation for employees who carry out the activities in their role
description and meet their objectives. Rewards and recognition can also be
given for team-based accomplishments or for meeting project-based targets.
Rewards and recognition have many uses, but in general they help:
 Shape employee behaviour and work ethic
 Give employees the opportunity to share in the benefits of their work
 Make employees feel like an integral part of the company
 Rewards and recognition may be monetary (bonuses) or non-monetary
(acknowledgement in a company newsletter or during a regular team meeting).
They may also be tokens that cost money such as gifts or celebratory meals.
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Performance Appraisal
 A performance appraisal is a regular review of an employee's job performance
and overall contribution to a company. Also known as an annual review,
performance review or evaluation, or employee appraisal, a performance
appraisal evaluates an employee’s skills, achievements, and growth--or lack
thereof. Companies use performance appraisals to give employees big-picture
feedback on their work and to justify pay increases and bonuses, as well
as termination decisions. They can be conducted at any given time but tend to
be annual, semi-annual, or quarterly.
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Contd..
Performance Appraisals Work
 Because companies have a limited pool of funds from which to award raises
and bonuses, performance appraisals help determine how to allocate those
funds. They provide a way for companies to determine which employees have
contributed the most to the company’s growth so companies can reward their
top-performing employees accordingly.
 Performance appraisals also help employees and their managers create a plan
for employee development through additional training and increased
responsibilities, as well as to identify shortcomings the employee could work to
resolve.
 Ideally, the performance appraisal is not the only time during the year that
managers and employees communicate about the employee’s contributions.
More frequent conversations help keep everyone on the same page,
develop stronger relationships between employees and managers, and make
annual reviews less stressful.
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Contd..
Performance Appraisal Types
 Most performance appraisals are top-down, meaning supervisors evaluate their
staff with no input from the subject. But there are other types:
 Self assessment: Individuals rate their job performance and behavior.
 Peer assessment: An individual's work group rates his performance.
 360-degree feedback assessment: Includes input from an individual,
her supervisor, and her peers.
 Negotiated appraisal: A newer trend that utilizes a mediator and attempts to
moderate the adversarial nature of performance evaluations by allowing the
subject to present first. Also focuses on what the individual is doing right before
any criticism is given. This structure tends to be useful during conflicts between
subordinates and supervisors.
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Benefits of Total Quality Management
Total quality management benefits and advantages:
 Strengthened competitive position
 Adaptability to changing or emerging market conditions and to environmental
and other government regulations
 Higher productivity
 Enhanced market image
 Elimination of defects and waste
 Reduced costs and better cost management
 Higher profitability
 Improved customer focus and satisfaction
 Increased customer loyalty and retention
 Increased job security
 Improved employee morale
 Enhanced shareholder and stakeholder value
 Improved and innovative processes
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Contd..
Total Quality Management (TQM) Benefit: Methodology
Creates an Adaptive Organization
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Supplier Partnership
Supplier Partnership
A commitment over an extended time to work together to the mutual benefit of both
parties, sharing relevant information and the risks and rewards of the relationship. If
both parties don't benefit by the relationship, there is no partnership.
Advantages of supplier partnership
A partnership can give suppliers greater visibility into how you operate, enabling
you and your suppliers to collaborate by reducing costs, improving service and
quality, and even innovating. And as more work gets outsourced, a company's
dependency on suppliers will increase.
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Partnering
 Within the construction industry, partnering, or an optimum relationship
between a customer and supplier, offers many opportunities to improve the total
quality and cost effectiveness of construction projects while developing an
atmosphere conducive to innovation, teamwork, trust, and commitment.
Partnering can be used as a vehicle to attain total quality management (TQM)
and enhance U.S. competitiveness in the worldwide marketplace.
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Contd..
Benefits of Partnering:
a. Continuous improvement of the quality of services and products
b. More effective utilization of resources
c. Improved profits (value) for all parties
d. Encourages innovation on projects
e. Develops long-term teamwork, trust, and commitment
f. Allows for continuous planned development of new skills and processes
Major Concerns of Partnering:
a. Protecting proprietary information
b. Evaluation/assurance of value received
c. Fair sharing of risks by all parties
d. Obtaining/maintaining total commitment
e. Creates strong dependency on partner
f. Limits competitive market strategy
g. Integration of differing company cultures
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Sourcing
Three types of supplier sourcing are:
 Sole sourcing
 Multiple sourcing and
 Single sourcing.
1. Sole Sourcing
Sole sourcing is the use of only one supplier for the organization. The organization
does not have any choice. It is forced to use only one supplier.
This forced situation is because of the following factors : patents, technical
specifications, raw material location, only one organization producing the item, etc.
2. Multiple Sourcing
Multiple sourcing is the use of two or more suppliers for an item.
The basic concept of multiple sourcing is that competition will result in better
quality, lower costs, and better service. (The selection of suppliers from various
alternatives is based on their performance in terms of prices, quality and delivery.
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Contd..
3. Single Sourcing
Single sourcing is the use of one supplier for an item when several sources are
available. It leads to long-term partnering relationship.
The suppliers should be treated as partners to achieve the same quality level as
attained within the organization.
The following forces need Supplier Partnership to improve quality, reduce costs and
increase market share.
 Deming Philosophy (Deming’s 4th point)
 Just-in-time
 Continuous process improvement
 ISO 9000
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Supplier Selection
 On the surface, it may seem that choosing the right supplier involves simply
looking at their price list. However, the supplier selection process is actually
much more complex and making the wrong choice can have a detrimental effect
on your organization.
 Your supply chain is a critical part of business operations and if one part of that
chain fails, you could run into issues that damage your reputation. Your
supplier Choice depends on a variety of factors such as quality, reliability, and
value for the money. How you weigh each factor is based on your business’s
strategy and priorities.
 As a startup with limited funds, you may place more weight on an affordable
price than an established business that can afford to spend a bit more or hold on
to higher inventory amounts to take advantage of bulk pricing.
“The supplier selection process is an important part of the procurement department’s
job. Streamlining the purchase to pay process enables procurement to spend more
time finding the right suppliers and negotiating the best possible deals.”
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Supplier Rating
 To obtain an overall rating of supplier performance.
 To communicate with suppliers regarding their performance.
 To provide each supplier with a detailed and true record of problems for
corrective action.
 To enhance the relationship between the buyer and the supplier.
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Relationship Development
 The action of causing the repetitive connection and evolution toward
accomplishing the common purposes of two or more people.
 This datum can be applied to friendships, family, dating, marriage, and of
course business.
 The point I really want to stress is “repetitive.” Example: a new client walks
through the door.
 They take a tour of your business and you hand them an information packet
describing your services. He/she says they’re interested and want to think about
it and they leave.
 Now the wrong thing to do sit back and wait for them to call.
 If you truly want to develop the relationship, and it’s your complete intention to
develop this person into a new client, you must create the “repetitive
connection” to remain fresh in their mind.
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Contd..
Steps to develop this new client:
 Get the contact information for anyone interested in your services. (Get their
phone number, email address, mailing address, etc.)
 Phone them; then follow that with an email or a personal letter thanking them
for their interest in your company, expressing your desire to service their
personal needs and thank them for calling/coming in.
 Continue the follow-up with promotional items, letters, calls, and successes of
recent clients. Keep the repetition in at least every other week, and always be
polite.
 Keep your website up-to-date with articles, blogs and free information and steer
the prospective client to these in all your promotional actions. This develops
trust and hope that your help would be beneficial to them.
 I hope this was helpful. This is a first in a series of articles on this subject so
please watch for the upcoming articles. Please feel free to write me anytime. I’d
love to hear from you whether it be success, feedback or questions.
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Performance Measures
Performance Measures
‘When you can measure what you are speaking about and express it in numbers, you
know something about it’.
‘You cannot manage what you cannot measure’
 Identifying and tracking progress against organisational goals
 Identifying opportunities for improvement
 Comparing performance against both internal and external standards
Reviewing the performance of an organisation is also an important step when
formulating the direction of the strategic activities. It is important to know where the
strengths and weaknesses of the organisation lie, and as part of the ‘Plan –Do –
Check – Act’cycle, measurement plays a key role in quality and productivity
improvement activities.
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Contd..
The main reasons it is needed are:
 To ensure customer requirements have been met
 To be able to set sensible objectives and comply with them
 To provide standards for establishing comparisons
 To provide visibility and a “scoreboard” for people to monitor their own
performance level
 To highlight quality problems and determine areas for priority attention
 To provide feedback for driving the improvement effort
It is also important to understand the impact of TQM on improvements in business
performance, on sustaining current performance and reducing any possible decline in
performance.
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Strategy
 The course of action accepted as the result of the estimate of the strategic
situation.
 It is a statement of what is to be done in broad terms sufficiently flexible to
permit its use in framing the military, diplomatic, economic, informational, and
other measures which stem from it.
Types of business strategies
Practically speaking, only three basic business strategies exist: a cost strategy, a
differentiated product or service strategy, and a focus on a niche strategy.
Understanding these strategies is critical to writing a good strategic business plan.
 Cost strategies
 Differentiated products and services strategies
 Focus strategies
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Contd..
Cost strategies
 Successful retailers rely on a cost strategy. Firms such as Walmart and Costco
excel at economically providing products to their customers. They pass along a
lot of the benefits of this economy to their customers in the form of lower
prices. Not all the cost savings get passed along to the consumers, however. A
significant portion of the cost savings, achieved through incredibly efficient
operations, are retained by the business and, therefore, become profits.
 Such cost leadership or low-cost operation is one of the three basic strategies.
And it’s a strategy available to any business — and particularly those
businesses that have achieved economies to scale.
 The key thing to note about a low-cost strategy, however, is that the firm needs
to retain some of the cost savings in order to earn a higher profit level than its
competitors. Thus, simply being a low-cost producer isn’t enough. A firm needs
to be a low-cost producer and still be able to price products and services at a
level high enough that some of the cost savings are retained as profits.
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Contd..
Differentiated products and services strategies
 The second basic strategy is product differentiation. Product differentiators
often sell a very unusual product or service. The Nordstrom department store
chain is a good example of this because it offers unsurpassed service, and often
(although not always), it offers a great and high-quality selection of items.
 However, Nordstrom goods cost more. But consumers happily pay the extra
amount. Why? Because they get so much more for their money.
 A firm that relies on a differentiation strategy competes on the basis of the
special features of its products or services.
 The key to making this strategy work is being able to charge your customers
more for those special features than the special features cost you.
Differentiation needs to produce increased revenues in excess of increased
costs.
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Contd..
Focus strategies
 The focus strategy is really a hybrid of the cost and differentiation strategies.
This strategy states that in some ways, a firm is really good about managing
costs; and in other ways, this firm is really good about differentiating products
or services.
 A firm may choose to take this hybrid approach because it understands a
particular audience or niche of customers or category of products; in other
words, the firm can, through this focused approach, serve a particular market
better than anybody else. This firm is going to be the best at serving a particular
niche.
 As a focus strategy retailer, Target focuses on suburban, middle-class customers
by offering those consumers almost the perfect combination of cost savings and
differentiated products.
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Basic concepts of TQM
 Quality: The totality of features and characteristics of product or service that
bears on its ability to satisfy stated or implied needs of a customer.
 Quality Policy: The overall quality intentions and directions of an organization
as regards quality formally expressed by top management. The quality policy
forms an element of the corporate policy and is authorized by top management.
 Quality Management: The aspect of the overall management function that
determines and implements quality policy. Quality management includes
strategic planning, allocation of resources and other systematic activities for
quality such as operations and evaluations.
 Quality Assurance: Quality assurance are all those planned and systematic
actions necessary to provide adequate confidence that a product or service will
satisfy requirements of a customer. Unless the requirements of customer are
fully reflected in the product or service, quality assurance will not be complete.
Quality assurance serves as a management tool to provide confidence in
supplier/manufacture in contractual situation.
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Contd..
 While taking a broad view of quality control, we come across different words
such as limits, tolerance, allowance, fit etc. These words are described in terms
of below limits. Limits for a dimension or other unit of measurement are the
two extreme permissible measurements for that dimension or unit.
 Quality Control: Quality controls are operational techniques and activities that
are used to fulfill requirements for quality. Quality control techniques and
activities aim both, at monitoring a process and at eliminating causes of
unsatisfactory performance at relevant stages of the production in order to
achieve economic effectiveness of an organization.
 Conformity: An affirmative indication or judgment that the
supplier/manufacturer of a product or service has met the requirements of the
relevant specifications, contact or regulations and also the state of meeting
requirements, is the real test of quality.
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Contd..
 "Quality Circle": QC is a process that stimulates everyone to achieve greater
satisfaction in the work environment. It is based on mutual trust and
cooperation. It also includes group participation, information sharing and
decision making. Its primary aim is to provide a better quality of working life to
workmen at all levels in an organization. "QC is a small group of employees in
the same work. work area or doing a similar type of work who voluntarily meet
regularly for about an hour every week to identify, analyse and resolve wok-
related problems, leading to improvement in their total performance and
enrichment of their work life".
 Tolerance: The tolerance as a dimension or measurement is the difference
between high and low limits of size for that dimension of measurement. It is the
variation tolerated in the size of that dimension/measurement to cover
reasonable imperfection.
 Allowance: The allowance is the prescribed difference between the high limit
for a shaft and the low limit for a hole to provide a certain class of fit.
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Contd..
 Fit: The fit between two metal parts is the relationship existing between them
with respect to the amount to play or interference which is framed when they
are assembled together. A fit can vary between a heavy drive to a coarse
clearance and Indian Standard Institute lists.
 Quality control procedures are primarily concerned with the quality of
conformance. Quality control technique have also helped in improving the
quality of design, resulting from the analysis of consumer's reaction and
production problem.
 Statistical process control (SPC), quality control circles (QCC), quality cost
analysis and many other subsystems and tools are perceived as useful, even
essential, to a Total Quality Control (TQC) effort.
 The basic concept of TQM are : customers-orientation (both internal and
external), never-ending improvement , statistical control of business processes,
upstream preventive maintenance, participative management, on going
preventive action, cross-functional management and committed leadership and
commitment.
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Unit-II TQM Principles

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Unit-II TQM Principles